Corporate Social Responsibility
III. Competition Commission of Pakistan (CCP) A report by the Competition Commission of Pakistan (CCP) emphasizes how the organization of the sugar industry in Pakistan serves as a stark example depicting the extent to which markets and public policy are routinely captured by interconnected interests. One of the main inefficiency of sugar production in Pakistan is the delay in payment to farmers which leads to less cultivation of sugarcane. It further predicts that the sugar industry in the long run may be characterized as driven not by competition but by economic rent-seeking. The report explains that a number of factors such as sugar recovery, molasses recovery, length of crushing season and size of the mill crushing capacity play an important part in determining the performance of the mill. The besides CCP the Sugar Report also produced an enquiry report after intense investigations stating that PSMA appears to be acting in violation of Section 4(1) of the Ordinance. PSMA seemed to be leading a cartel in the sugar industry. From the evidence it was gathered that under the face of PSMA sugar mills were working in a “closed and protected” market instead of competing fairly. This arrangement seemed to be managed “collusively and collectively” by PSMA.20 PSMA emerged to be operating a buyer’s cartel. According to the communication records between sugar mills and between PSMA and various government departments the mills had colluded to ensure a collective sugarcane pricing and purchasing policy. These decisions were communicated, coordinated and implemented by PSMA. The millers had agreed to buy sugarcane within a particular territory; within 15km radius of the mill no one apart from that specific mill was to buy the sugarcane from the farmer. Moreover, for instance, in Punjab the PSMA Punjab zone would set a base price for sugarcane then the regional committee would determine the maximum price for different varieties of sugarcane plus the rate of deductions to be levied on ‘unapproved’ varieties. The seriousness of the commitment was obvious as any member of PSMA this trend was to be adjudicated by PSMA.
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COMPETITION COMMISSION OF PAKISTAN ENQUIRY REPORT ON COLLUSIVE PRACTICES IN THE SUGAR INDUSTRY, Shaista Bano Gilani; Syed Umair Javed, 21st October 2009
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